How Fannie Spent Half A Billion Just To Hide Its Books

There are so many outrageous stories to come out of Fannie Mae and Freddie Mac, from the horrible business and accounting practices, to the former politicians that made millions at ceremonial jobs working for them.

However there's something particularly brazen and maddening about this one, as told by Bloomberg's David Reilly. It's pretty simple. Early last year, as it was clear that housing loans were starting to badly sour, Fannie Mae funded $462 million HomeSaver Advance loans. They were basically loans -- secured by absolutely nothing, with no strings attached -- to homeowners to help them catch up on their home loans.

In other words, loans to pay loans -- given out to the worst borrowers.

The whole thinking was that this would stave off potential writedowns (because it would make the underlying mortgages look like they were still performing) and that perhaps the economy would turn, the loans would be paid back, and everything would work out.

But nope, turns out that didn't work and those $462 million worth of loans now have a market value of... wait for it... $8 million.